The study shows that while cost controls remain crucial to survival, SME exporters may benefit from both new sources of consumer demand within Asia and from the rising volume of trade within the region. The benefits are even greater if more advantage is taken of Asia’s many Free Trade Agreements (FTAs), according to thereport.
The report, titled ‘Towards the Recovery: Challenges and Opportunities facing Asia’s SMEs,’ is based on interviews with corporate officers at SMEs, regional experts and a review of recent studies published by leading authorities, including the Asian Development Bank and national governments in the region.
Small and medium sized enterprises, which comprise 95 per cent of businesses in the Asia Pacific region and employ nearly 80 per cent of the workforce and hence play a critical role in the region’s economic recovery and growth in 2010, according to FedEx Express Asia-Pacific president, David L. Cunningham Jr.
“With demand in the West making a slower recovery than Asia’s rapidly improving economic outlook, this report provides SMEs in the region with an understanding of the new trade dynamics that are emerging here. As a facilitator of trade, we believe the report’s insights will help SMEs to evaluate these new opportunities and tap into the regional recovery underway in Asia.â€Â
One of the report’s key findings examines how SMEs stand to benefit from two new interlocking dynamics within the economies of the Asia Pacific region. The first is a need to rebalance economies in the region to reduce their reliance on consumers in developed Western markets and turn their attention towards domestic demand.
The second is intra-regional trade, by which SMEs in smaller markets in Asia may take advantage of increasing consumer demand in the region’s developing giant economies, namely China. Against a backdrop of slow economic recovery in the West, Asian SMEs would benefit from an emerging customer base within the region.
There are signs that China may be able to provide this, as its middle class becomes wealthier and policy makers seek to rebalance its economy away from a reliance on exports and towards domestic demand, according to the report.
In the first three quarters of 2009, while much of the world was mired in economic recession, China’s retail sales grew by 15.1 per cet year-on-year, almost as fast as before the financial crisis.
The buoyant Chinese economy has the potential to anchor a new region wide trade dynamic, with China not just an assembly point for exports to Western markets, but as a final destination for goods from other Asian countries, the EIU said.
This was also given a significant boost recently when a Free Trade Agreement between China and the Association of South-East Asian Nations (ASEAN) went into effect on 1 January 2010, which will ultimately create a common market of some 1.7 billion people and under the agreement, 90 per cent of goods traded between China and ASEAN’s six richest member states now enjoy zero tariffs.